New era Pan Xiangdong: Will this round of A-share market “begin with pigs and die from pigs”?
Pan Xiangdong: Will the current round of A shares “begin with pigs and die from pigs”?
This article is the Deputy General Manager and Chief Economist of New Times Securities, Dr. Pan Xiangdong, recently held at the China New Supply Economics Research Institute, China New Supply Economics 50 Forum, and China Pension Finance 50 Forum jointly held in the first quarter of 2019.Segmentation at the economic budget analysis meeting.
Dear leaders, friends, good morning!
Just now Mr. Zhou mentioned that we should carefully mention “de-industrialization”. I share the same opinion. In the past, we promoted urbanization through industrialization. Next, we need to accelerate the process of urbanization, stimulate domestic demand, and then further deepen our industrialization process.
We always think that our economy is the second largest in the world. In fact, our per capita GDP has only reached 15% of the United States. There is still a lot of room for growth. Don’t look at the accumulation and pay more attention to per capita. The average per capita consumption of industrial products is still very high.Low, industrialization is not complete.
In making our economic judgments, we must not keep an eye on the upgrading of the 300 million middle-class consumption represented by our “Northward, Shenzhen-Shenzhen”, and we should pay more attention to how one billion low- and middle-income people move towards the middle class.
Because I work in an investment bank, my comparative advantage is that I pay more attention to asset allocation than the experts here, so I have the opportunity to share with you the macroeconomic issues and capital market issues we are concerned about.
The spring of the capital market has actually started last year, just because everyone is more concerned about the stock market than the bond market.
At the beginning of last year, the marginal changes in liquidity, the bond market has begun to bullish.
By October of last year, the overall warming of monetary and regulatory policies had been adopted, 杭州桑拿 and the stock market had begun to stabilize.
In the fourth quarter of last year, the market went very tangled because investors had “worries” over the past bear market injuries and added the pledge risk of large shareholders’ equity.
After the Spring Festival, A-shares have experienced rapid growth, and investor enthusiasm has become relatively high.
If we are still discussing whether the bull market has begun, apart from training eloquence and earning click-through rates, it will not make much sense to investors.
Such discussion and thinking should be in the fourth quarter of last year and in January of this year.
As an investor, the question that needs to be considered now is whether there will be external forces or risks in the future. Terminating this round of market will make adjustments to this round of market.
If not, then this activated market will continue this enthusiasm until “irrational exuberance”, which is what we usually call a frenzy, which scares all participants in the end.
I came to the investment bank in 2008 and joined the work. In the past ten years, the turning points in the operation of our stock market are closely related to major macro policies.
The joint-stock system reform was launched in 2005, which included the improvement of the economy. The stock market opened a bull market. However, the price growth rate in the second half of 2007 rose. Everyone began to change gradually. The Central Economic Work Conference in December 2007 set a target for 2008.Make macro budgets and tighten currencies.
Therefore, the top of that round of bull market appeared before the Central Economic Work Conference.
Of course, there was an overseas crisis later in 2008, but in the first half of 2008 we did raise the reserve ratio and raise interest rates.
With the launch of the central government’s vigorous anti-cyclical policy in the fourth quarter of 2008, the stock market opened a bull market and continued to run until December 2010. At that time, prices began to rise due to the better economy. The central economic work conference in December 2010 set the tone.In 2011, we need to carry out a macro decomposition. Remember the words of the Prime Minister at the time, the local financing platform must be “pulled out with roots”, and the A-share market was terminated.
In 2012, we started innovation in the capital market. Financing plus leverage was started at that time, and the stock market also ushered in a spring. This spring is of course a spring for raising estimates.
Due to the opening of the “magic box” that can be financed and leveraged, the securities frenzy became unstoppable. Finally, the regulatory authorities “unbearably end” at the end of June 2015 and stepped on the sudden brakes, which led to the end of the market.
We all know that this round of A-share prices is actually not because of the stabilization or recovery of our economy, but because of the abundant liquidity and the warming of policies since last October.
The warming of the policies of both sides of our monetary policy also includes our regulatory policies.
In this way, the two joint forces lead to market growth, and investors in the market are talking about the gradual improvement of liquidity and policy synergy, not the improvement of corporate profits.
In response to this question, I published an article during the Spring Festival, “Why is the economy in the cold winter, but the capital market has ushered in spring?
“, Which was carefully explored.
There is no need to discuss the question that the market has already answered.
As long as there is no serious diving in the economy, the external forces that can change the current upward movement of the stock market are currently mainly: one is the breakdown of Sino-US trade talks and the deterioration of the external environment for China’s development. At present, this risk is very small.The progress of the trade negotiations is relatively smooth; the second is the change in regulatory policies. At present, this risk is relatively small, because the stock market has just warmed up, and it is far from madly pushing for regulatory supervision as in 2015. Now the regulatory authorities are still protecting the market development.The third is the change in monetary policy. At present, it is necessary to make changes in monetary policy unless it gradually rises.
Then let’s analyze below, is there any possibility of serious expansion of the expansion.
I have been thinking about this problem recently. As soon as I have a chance in the past two or two months, I will go to grassroots research or telephone survey of listed pig companies, non-listed pig companies, pig experts, vaccine experts,Local governments, feed companies, food companies, etc. today have the opportunity to share with everyone.
I don’t comment too much on the operation of the economy, and some economic experts will make a more detailed analysis later.
This round of the pig cycle has begun, and the impact on our prices in the future may exceed market expectations.
We know that the global consumption and supply of pork is one.
About 100 million tons, of which our production volume is about 5,200, and consumption volume is about 5,400. In fact, we have to rely on some imports to stabilize the balance between consumption and supply.
Our consumption and supply account for 50% of the world. Why do we say that number?
This is because when many people talk about our pork problem now, they will say that if the price goes up, we can calm down by importing to the United States. Is this really the case?The United States produced about 1100 years, and its consumption accounted for more than 8% of the world, which is about 900, and it can export 200 inches.
If a market that accounts for 50% of the world is subject to the same impact as in the past ordinary pig cycle, this impact is not significant, and it should be possible to calm down part of it by increasing imports.
However, if this production market is strongly impacted, it will only affect domestic food prices and may also affect global food prices.
We imported about 14 US pork in the first quarter.
In August, the price of US pork futures has risen by 50% since the beginning of the year.
Let’s explore how much our supply has been affected.
In the past few years, we have been de-capacityizing. In the past, due to some environmental protection requirements, we have almost eliminated some small and medium-sized pig farms. In the past, everyone had the impression that many people in the rural areas raised pigs, but due to environmental protection requirements, slowlyAll the pigpens were closed.
But there has been a superposition of “African swine fever” since last year.
Why is it called “African swine fever”?
It was because in 1921 this type of swine fever originated in Kenya and moved from Africa to Europe.
Why does “African swine fever” affect so much?
We import pork now, it is impossible to import pork again, and then culled in the place of consumption (only Cantonese and Hong Kong people have this hobby, like hot meat consumption). Now all are imported pork that has undergone low temperature treatment, as normal.After the low temperature treatment, the virus should be killed. The virus only has a strong survival rate at a moderate temperature. The virus will be killed in a high or low temperature environment, but the “African swine fever” virus has a very strong survival ability.It can also survive in low temperature environment. Therefore, “African swine fever” was brought to China through the import of pork. The first case occurred in Liaoning last July, which is extremely contagious.
Our grass-roots research has learned that because of the lack of understanding of the transmission of “African swine fever” at that time, “African swine fever” was found in one place, so all pigs within two kilometers of the surrounding area will be hunted, because they are worried that the swine fever will passRespiratory infection.
Of course, it was later known that it was transmitted through contact, and then it was discovered that “African swine fever” was replaced by fixed-point removal.
The result of the killing is, of course, based on our grassroots research. According to the introduction of the breeder in the industry, the Northeast lost about 50% -60%, and our large pig-producing provinces Shandong and Henan consumed about 35% -40% (agriculture(Official research published by the Ministry of Rural Affairs has shown that the average reduction in sows can reach more than 30%).
Last year, the south was still very good. Through the embargo in the affected area, “African swine fever” was not brought to the south. However, during the Spring Festival, due to the northbound carriage going south and the southbound carriage going north, the contact-borne virus was around this year’s Spring Festival.It spread to the south, and now Jiangxi, Hubei, and Guangdong also suffer losses of 15% -20%.
On April 7th, Tibet also announced the discovery of “African swine fever”, that is, all provinces, municipalities and autonomous regions in mainland China have found African swine fever.
No vaccine for “African swine fever” has been available since 1921, but it does not mean that we will not be able to develop a vaccine in the future.
Because the “African swine fever” that broke out in the past was not a big country producing pigs.
So, from a budget perspective, those countries don’t have much incentive to develop vaccines.
However, as far as we are concerned, the annual production volume of more than 5,000 additives is completely motivated to produce vaccines. This market has huge space.
But when we went to study, we learned that pig farmers were advised not to produce the “African swine fever” vaccine.
They believe that if the vaccine is produced, the entire swine industry wastes at least 20%, because the vaccine means that the African swine fever virus has taken root in the pigsty and it will be lost.
This is a subversion of my past views.
I used to think that it would be better to have a vaccine. This problem is solved. Actually, once the vaccine is available, it means that “African swine fever” will take root everywhere. Rooting will bring consumption of pigs.Increase costs by 20%.
Pig companies believe that as long as everyone can make efforts to prevent and control, the cost loss should be reduced to less than 20%.
According to the grassroots survey, about 30% of the waste in the pig industry has been around since last year. This is what we learned from some pig industry professionals from last year to this year.Monthly pig feed production decreased by 23%, piglet feed and sow feed output decreased by 30.
6% and 38.
Of course, this is the most optimistic forecast, and some feed companies say that there may be 40% loss.
Why is this difficult to count?
During the course of this investigation, I also learned that, including in the south, the “African swine fever” was found to be unreportable in some places, and it was dealt with immediately after it was discovered.
This provides us with a great deal of change in future supply changes.
Why not report it?
Because “African swine fever” was found in one place, the government at the next higher level should be held accountable.
The result is that local governments will conceal the incidence of African swine fever.
Originally, in order to ensure the enthusiasm of farmers, the Ministry of Agriculture and Rural Areas of China will compensate pig farmers with “African swine fever”. There will be less occurrences of supplementary farmers, and there will be enthusiasm to continue production, but local governments are worriedTo be held accountable and not to report, then the farmers will not get the corresponding supplements. Let’s think about it. Are there any enthusiastic pig farmers?
As a result, the subsequent supply will be further reduced.
Therefore, the actual losses may be greater than those announced, and the future supply expansion cycle will be further lengthened. According to one of our most optimistic estimates, the loss is about 30%. We have an output of more than 5,000 tons. The output is reduced by more than 1,000 tons. The output of the US output is 1100 tons. The gap is so large.?
The global pork trade was only around 800 in 2017.
Everyone said that pork prices rose in March, and we see that the growth rate of CPI is indeed picking up, including the recent bond market that is under pressure, and everyone has begun to expect inflationary pressure.
However, according to the results of recent studies, it is expected that pork prices will really start to increase significantly from late June to early July.
Because this is related to the comprehensive clean-up of pig slaughtering enterprises by local organizations.
Recently, the Ministry of Agriculture and Rural Affairs issued a notice on strengthening slaughtering and increasing monitoring of African swine fever. The slaughtering enterprises completed their self-inspection before July 1. Therefore, the slaughtering enterprises’ frozen warehouse pork gradually concentrated on the market, resulting in a short period of pork pricesRise.
But once the pork in the freezer was digested, the shortfall in supply directly occurred.
Some investment banks predict that our pork price will increase by 50%, and an official from the Ministry of Agriculture and Rural Affairs announced that our pork price will increase by 80% this year (from Nongbo.com on March 11th).
But no matter how much the price has risen, the gap is so large.
Maybe the price of pork rises, everyone’s consumption will decrease, it will find this balance, maybe “African swine fever” continues to spread, causing this gap to decrease.
Therefore, it is difficult for anyone to predict how much it will increase.
I can only tell you that this gap is so big, and I can’t make up for it through imports.
Completely, now “African swine fever” has also started to spread to Vietnam, and it is expected to spread to other parts of Southeast Asia.
Therefore, with such a large capacity gap, it is difficult for me to make a judgment on how pork prices will go in the future.
Assuming 80% of the Ministry of Agriculture and Rural Affairs as the benchmark, our pork price will account for 2 in the CPI.
8%, food prices account for 29% of the CPI weight. Based on this calculation, the rebound of overlapping oil prices, our CPI growth rate may reach 4% in the fourth quarter of this year to the first quarter of next year.
And the impact of this round of African swine fever may last long, because this round of swine fever has caused a significant reduction in breeding pigs and sows, and it takes two to three years to train them.
At the beginning of the US production, they will start planning and demonstrating the construction of pig pens.
In this case, it is still a question whether our monetary policy will be able to release a large amount of loose money as in the first quarter of this year.
Once this aspect is opposed, the impact on our entire asset allocation will come out.
Everyone may say that since it is caused by pork and even caused a series of structural declines, and tightening monetary policy cannot solve the problem of pork supply, why should monetary policy be changed?
Thinking back to 2008, wasn’t the tightening of monetary policy in the first half of the year due to the structural increase brought by the rise in pork prices?
Today I share with you the supplement of monetary policy, and I think this is a risk point for the future of our asset allocation.
Of course, the last thing I want to see is that this round of market started from the pig sector last August, and finally “died from the pig”, which happened to be the year of the pig again.
Of course, it is still too early to say for the A-share market, after all, pork prices have not risen significantly.
However, the bond market still needs to be prepared for risk prevention.
I have reached the opportunity to say that I hope everyone will put them on it and make three suggestions: 1. Whether it is the Ministry of Agriculture and Rural Affairs, or our decision-making department, we can now do some planning and scratching to vigorously support the pig industry.Capacity.
Especially for companies with strong capital strength, the state can encourage large-scale pig breeding by providing preferential policies (financing policies, fiscal policies, etc.); 2. It is not appropriate to blame where swine fever is found, because “African swine fever”It is extremely contagious. Once it is not controlled well, it will cause strong damage to other areas that are not infected, but the result of accountability will be concealed in some places. Such a result will hurt the enthusiasm of farmers to re-operate.It is not conducive to the recovery of future supply, so it is necessary to grasp the scale; 3, don’t because the increase in pork prices in the second half of the year will gradually affect the structure of our overall monetary policy, and also affect our overall macroeconomic operation, and then monetary tighteningNor will it change the fact that pork will be scarce in the future. The rise in prices caused by the structure is best solved through targeted fiscal and administrative measures. On the contrary, changes in alternative policies are more likely to exacerbate changes in macroeconomic operations.
In the future, there will be more than 1,000 tons of pork shortage in developing countries, and the entire estimated global trade volume will be more than 800 tons. It is estimated that 200-300 tons can be allocated to it. After 7 months of cold storage self-inspection, the frozen meat will be sold.It has already been expected that the rise in pork prices is expected to follow.
And because this round of “African swine fever” is completely fat, pigs and sows are affected by the same proportion, and “African swine fever” is still spreading across the country, and this round of pig cycles is expected to last three yearsAbove, everyone also needs to be prepared for pork that may become a “high-consumer product” and plan ahead.
This is the original intention of telling you about the pig cycle this time.
thank you all!